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ACCC takes Metcash fight to court

ELEANOR HALL: There's a battle brewing between grocery distributor Metcash and the competition regulator. The Australian Competition and Consumer Commission is taking Metcash to court to try to stop it from buying the Franklins supermarket chain.

The ACCC says the move would substantially reduce grocery competition in New South Wales but today Metcash said it was looking forward to a fight.

Finance reporter, Sue Lannin, joins us now. So Sue, what is the competition regulator saying about this move?

SUE LANNIN: Well essentially the ACCC thinks the plans by Metcash to buy the Franklins chain of supermarkets in New South Wales for around $200 million would substantially lessen competition as your mentioned. Now that is because Metcash supplies to the IGA chain so they are an independent franchise, they are a franchise which has independent stores.

Now about two weeks ago the ACCC said it opposed the plans by Metcash to buy Franklins and it said that it is because Metcash is Australia's largest grocery wholesaler, it services the IGA stores and it thinks that by Metcash buying Franklins it would remove the only genuine competitor for the supply of packaged groceries in New South Wales so it is very much a competition issue.

Last week Metcash stared down the ACCC and said it would go ahead with the purchase anyway in five business days. Now the ACCC has come back and said well we are going to go to the Federal Court to try and get an injunction to stop you from doing that.

ELEANOR HALL: And how has Metcash responded to that?

SUE LANNIN: Well, they've come out today and made another very bullish statement to the market. Andrew Reitzer says that Metcash is delighted to have the opportunity for the Federal Court to determine whether Metcash can go ahead with the transaction and in a very pointed statement he says "we clearly have different views to the ACCC regarding the Australian grocery market".

Now Metcash has though agreed to put off the purchase until a decision is made by the Federal Court so that would be expected in the new year.

And also just a side bar, there is actually a Senate enquiry going on because the Queensland National Senator Ron Boswell actually opposes the ACCC trying to prevent the Metcash purchase of Franklins from going ahead so today is actually the deadline for submissions to that enquiry.

ELEANOR HALL: Well, the focus of the ACCC's enquiry as you have been pointing it out is on New South Wales but just how highly concentrated is the grocery market nationally?

SUE LANNIN: Oh, its basically a duopoly. Woolworths has got about 40 per cent of the market, Coles has got a third of the market. IGA is the third player. It has got about 20 per cent of the market.

And there is a tiny 3 per cent that is the discounters space although the interesting thing is that a lot of analysts think that that space will grow because we've seen ALDI, the European supermarket chain have tremendous success and expand across many areas of Australia and Costco, the US warehouse chain is also making inroads.

ELEANOR HALL: And do we know why Ron Boswell is in favour of the sale?

SUE LANNIN: For Ron Boswell, he is very much looking at regional Australia. It seems that he thinks that also he hates the ACCC and he is taking a particular stance against them because the enquiry is actually called 'The Enquiry into the Australian Competition and Consumer Commission - Franklin decision'. So certainly he has decided to take on the ACCC in this instance.